Charles Mulenga & 10 Ors v National Housing Authority (APPEAL NO. 6/2009) [2013] ZMSC 54 (13 February 2013)

IN THE SUPREME COURT OF ZAMBIA HOLDEN AT LUSAKA APPEAL NO. 6/2009 BETWEEN: CHARLES MULENGA & 10 OTHERS APPELLANTS AND NATIONAL HOUSING AUTHORITY RESPONDENT CORAM: CHIBESAKUNDA, A/CJ, MAMBILIMA, DCJ AND MWANAMWAMBWA, JS On 22nd July 2010 and 13th February 2013 For the Appellants: Mr. C. L. MUNDIA, SC, of C. L. Mundia & For the Respondent: Mr. N. H. G. MHANGO, of Nyangulu & Company Company MAMBILIMA, DCJ, delivered the judgment of the Court. JUDGMENT CASES REFERRED TO: 1. INDENI PETROLEUM REFINERY COMPANY LIMITED VS V. G. LIMITED, SCZ No. 22 OF 2007 2. ZNPF BOARD VS NYAMBE MWANGALA, SCZ No. 122 of2000 3. LUKAMA & OTHERS VS LINT COMPANY OF ZAMBIA, SCZ APPEAL No. 8 of 1998 4. ZAMBIA RAILWAYS LIMITED VS KAUNDA & OTHERS , SCZ APPEAL No. 147 of 5. COLLET VS VANZYL BROTHERS LTD (1996) ZLR 96 LEGISLATION REFERRED TO: 1. THE EMPLOYMENT (AMENDMENT) ACT, No. 15 of 1997, CAP 268 OF THE LAWS OF ZAMBIA 2. THE JUDGMENT ACT, CAP 81 OF THE LWS OF ZAMBIA This is an appeal from the decision of the High Court, in which it was decided that the Appellants' terminal benefits should be calculated based on salaries that were prevailing in the year 2000 instead of the year 2002. The Court also declined to grant the Appellants accrued leave days and long service bonus that could have been earned from the year 2000 to 2002. It however ordered that the Appellants be paid enhanced repatriation allowance calculated on salaries that were prevailing in 2002, and interest 'calculated on the salaries of 2000', at the average short term deposit rate from the date of the Writ up to the date of judgment and thereafter at the Bank of Zambia lending rate. The Appellants were awarded 25% of the costs. The facts in this case are common cause. They were settled in a Statement of Agreed facts that was filed in Court. A copy of the said Statement appears on pages 124 to 126 of the record of appeal. The Appellants were declared redundant on 7 th March 2000. Due to financial constraints, the Appellants' terminal benefits were not paid at the time of separation. The Respondent however, continued to pay them their salaries. This intention was expressed in the letters of redundancy served on the appellants. The letters stated inter alia, that:- "In the event that the Authority is unable to pay your benefits on the last day of duty, the Authority undertakes to pay you your monthly basic salary only until your benefits are paid. You will not earn any other benefits, neither will the basic pay change during this period of waiting because you are no longer an employee of the Authority. This further means that all your dues will remain frozen as per total figure shown in the annexure .... " It would appear that between the date of their retrenchment on 7th March 2000, and April 2002, when the terminal benefits were paid, the Respondent revised salaries for its workers. The Appellants' monthly salaries were enhanced to include the said salary revisions. When it came to the computation of their benefits however, the Respondent refused to calculate them on the basis of the revised salaries and also refused to credit the Appellants with leave days and long service bonuses for the period after retrenchment. The net result was that the Appellants' benefits were worked out on the basis of salary scales that were prevailing at the time of their retrenchment, notwithstanding the salary increments that were given to them in 2001 and 2002. In his judgment, the learned trial Judge was of the view that this dispute should be determined on the construction or application of Section 26 B (3) of THE EMPLOYMENT (AMENDMENT) ACT1 • It provides:- "(3) An employee whose contract of service has been terminated by reason of redundancy shall- (a) Be entitled to such redundancy payment as agreed by the parties or as determined by the Minister whichever is the greater; and (b) Be paid the redundancy benefits not later than the last day of duty of the employee: Provided that where an employer is unable to pay the redundancy benefits on the last day of duty of the employee, the employer shall continue to pay the employee full wages until the redundancy benefits are paid." The Judge stated that this provision only applies to oral contracts. This is because Section 26 B is in Part IV of the Employment Act. The preamble to this part is Section 16 which reads: "The provision of this part shall apply to oral contracts.,, According to the Judge, although the agreed facts were silent on the applicability of Section 26B (3) of the Employment Act, the trial proceeded on the basis that it was. He formulated two issues for the resolution of the Court. The first one was:- "Were the Appellants entitled to packages calculated on 2000 or 2002 salaries " when they were declared redundant? In answer to this question, the Judge concluded that the Appellants' separation packages should be computed on the basis of salaries that were prevailing on the date of redundancy, which was 7 th March 2000. He reasoned that if the Appellants had been paid their terminal benefits on the date of separation, that could have settled the matter. In his view, where it is not possible to pay on the date of redundancy, Section 26B (3) of THE EMPLOYMENT ACT1 comes in to mitigate the 'lf.nancial agony' of the employee. The second issue that the Judge formulated was with regard to the claim for accrued leave days, long service bonus and other allowances. The question was; whether these benefits should be calculated on the basis of the 2000 salaries or those that were prevailing in 2002. Adopting the same reasoning that was applied to the first issue, the Judge was of the view that leave days could only accrue when someone was in actual employment and not after Section 26 B (3) has come into operation, because according to him, leave means 'rest' and a person who is not working cannot accrue leave days. Likewise, he was of the view that long service bonus could only accrue prior to Section 26 B (3) coming into effect. On the allowances that the Appellants enjoyed, the Judge singled out repatriation allowance and decided that this should be paid at the salaries that were prevailing in 2002 when the redundancy package was finally settled. He reasoned: "To me, this calls for no more than little common sense if repatriation funds were intended for purposes of enabling the employee to be repatriated, an employee declared redundant in 2000 may pay 2Y to return home whereas the same employee over the same distance, may spend 4 Y two years later." Consequently, judgment was entered in favour of the Appellants for enhanced repatriation allowance calculated on the basis of the 2002 salaries. The Judge also considered the question of whether interest was payable. Relying on Section 2 of THE JUDGMENTS ACT2 , he found that interest was payable. The Section states inter alia that:- "Every judgment, Order or decree of the High Court or of a subordinate court whereby any sum of money or any costs, charges or expenses, is, or are to be payable to any person shall carry interest ..... " To justify his conclusion, the Judge relied on the case of INDENI PETROLEUM REFINERY COMPANY LIMITED AND V. G. LIMITED1 , in which LEWANIKA, DCJ, stated that the basis for an award of interest is that the Defendant has kept the Plaintiff out of his money and the Defendant has had the use of it himself, so that he ought to compensate the Plaintiff accordingly. According to the Judge, interest in this case should be "calculated on the salaries of 2000 when the Plaintiffs were declared redundant and should be payable at the average short term deposit rate from the date of the Writ up to the date of judgment and thereafter at the Bank of Zambia lending rate." The Appellants, having succeeded on the issues of repatriation and interest, were awarded 25% of the costs. Dissatisfied with this judgment, the Appellants have appealed to this Court, advancing three grounds of appeal; namely, that:- 1. The trial Judge erred in law and in fact when he decided that the separation package be based on 2000 salaries instead of 2002 when the said salaries were voluntarily awarded by the Respondent to the Appellant. 2. That the Judge erred in law and fact when he denied the Appellants long service bonuses, leave days and the calculation of the benefits under this ground based on 2000 salary but instead upheld the award of benefits as at the date when they were declared redundant. 3. That the trial Judge erred in law and in fact when he awarded costs at 25% without proper evaluation of the case pursuant to the Statement of Agreed facts. In support of the first ground of appeal, the learned Counsel for the Appellants submitted that at the time of the redundancies, the Respondent worked out the Appellants' terminal benefits based on 1997 salaries and not 2002, inspite of the fact that salaries had been raised by April 2002. That in the same vein, the Appellants were denied accrued leave days from the date of their retrenchment to the time that they were paid their full benefits in 2002. He submitted that the Judge did acknowledge in his judgment, that the Appellants were paid their salaries during the period of their retrenchment and these salaries later included the revised emoluments that were effected in April 2001 and 2002. He submitted however, that there is nothing contractually wrong for an employer to provide for more benefits to his ex-employees than those provided by law. For this submission, he referred us to the case of ZAMBIA NATIONAL PROVIDENT FUND BOARD VS NYAMBE MWANGALA2 , in which this Court stated inter alia:- "We agree with Counsel for the Respondent that this Court's previous awards do not preclude the parties from coming to awards higher than Courts will always encourage ex-curia what we have awarded. settlements .... " Counsel argued that the Respondent, having provided the Appellants with salary increments for the years 2001 and 2002, their terminal benefits should have been worked out on the basis of salaries that were obtaining in 2002. On the second ground of appeal, Counsel repeated his submissions in support of the first ground. He stated that the year 2000 was simply the year of redundancy and there was no good reason why the benefits and the long bonuses were based on the 1997 salaries as opposed to 2002. He referred us to various pay slips on record showing the Appellants' salaries in the year 2000 and in 2002. Counsel further submitted that it was strange for the Judge to have enhanced the repatriation allowance by using the 2002 salaries, while refusing the Appellants' claim that their packages be calculated based on salaries that were applicable in the year 2002. According to Counsel, it was a misdirection for the Court to accept that repatriation alone should be calculated on 2002 salaries and not the other allowances. He argued that like repatriation, whose increase the Judge justified because of the enhanced cost of transport, other claims also suffered a similar fate due to inflation. To support his contention, he referred us to two cases. The first one is LUKAMA AND OTHERS VS LINT COMPANY OF ZAMBIA3 and ZAMBIA RAILWAYS LIMITED VS KAUNDA AND OTHERS4 • He submitted that in both cases, the Court held that the Plaintiffs were entitled to new salaries while serving their notice periods. Counsel submitted that it was inconceivable that the Court below; being a Court of law and equity, could deny the Appellants what was due to them when there was no explanation by the Respondent as to why it could not comply with its own conditions of service. On the third and last ground of appeal, Counsel submitted that the general principles underlying the award of costs are outlined in Order 62 Rule 3 of the Supreme Court Rules (1999) Edition. This is that costs are awarded in discretion of the Court after taking into account all the circumstances of the case. He stated that in this case, the Respondent did not comply with its own conditions of service when it denied enhanced benefits to the Appellants without just cause or excuse. To buttress his argument, Counsel referred us to the case of COLLETE VS VAN ZYL BROTHERS LIMITED5 , in which this Court held that 1n exercising its discretion to award costs, the Court must do so judiciously. Counsel contended that the Court below did not exercise its discretion judiciously in that it did not take into account the conduct of the Respondent. According to Counsel, to award 25% costs was inappropriate because the Appellants had been put to great trouble and expense at no fault of their own. Counsel prayed that this appeal should be allowed with costs, both in the Court below and in this Court, and that damages should be awarded to be assessed by the Deputy Registrar in default of agreement. He also asked for interest at statutory rates. In response to the submissions by the learned Counsel for the Appellants, the learned Counsel for the Respondents submitted that the lower Court was on firm ground when it stated that the separation package between the Appellants and the Respondent should be based on the Appellants' salaries of 2000 and not 2002. That this is because the Appellants were declared redundant in the year 2000 when the redundancy package that was applicable was under the 1997 conditions of service. That salaries were increased in the year 2002 after the Appellants had already been declared redundant and out of generosity, which Courts should encourage, the Respondent extended the increase to the Appellants. He argued that this action by the Respondent, did not mean that the Appellants were still employees of the Respondent and neither did it mean that the date of redundancy or separation was extended. The learned Counsel for the Respondent further submitted that Section 26 B (3) of THE EMPLOYMENT ACT 1 is very clear; by 'wages' the Section means wages as at the date when the employee was declared redundant. That in the case of the Appellants, this was 7 th March 2000. That the proviso to this Section requires that an employer should continue to pay wages to the employee who is declared redundant until his redundancy package is paid; otherwise the Section would have specifically directed that no employer should declare an employee redundant unless that employer is ready to pay the employee the redundancy package right there and then. Counsel contended, consequently, that the law does envisage and allow a situation where an employer may declare an employee redundant but be not in a position to pay the redundancy package at the date of declaring such an employee redundant. According to Counsel, the Respondent in this case merely complied with the law by continuing to pay the Appellants wages until 2002. He argued that this gesture did not extend the date of redundancy from 7 th March 2000 to April 2002. He distinguished the case of LUKAMA 1 that was cited in support of the Appellants' case from the case in casu in that employees in the LUKAMA1 case were on notice period and the Court ruled that they should be paid their redundancy packages on the date of expiry of the notice period, while in this case, the Appellants had already been declared redundant on 7 th March 2000. On the second ground of appeal, the learned Counsel for the Respondent submitted that a person who is declared redundant is no longer in employment and therefore cannot accrue leave days or a long service bonus. That leave days and long service bonus only accrue up to the date of redundancy which in this case was on 7 th March 2000. He argued that the Respondent was therefore right to refuse to pay leave days or long service bonus after the Appellants had been declared redundant. Counsel submitted further that in this case, the facts were agreed upon by the parties and what was in issue was the interpretation and application of Section 26B (3)(b) of THE EMPLOYMENT ACT1 • That this is still the issue in this appeal; the interpretation and the application of the law on the facts as agreed in the Court below. He submitted that while the law in question compels an employer to continue paying wages until the redundancy package is paid; it does not extend the redundancy date. The redundancy package must therefore be based on the redundancy date. On the third and last ground of appeal, Counsel submitted that the lower court exercised its discretion to award costs judiciously and there is nothing to suggest otherwise. That the Appellants only won on two claims; that of interest and repatriation. That good reasons were advanced by the Court below as to why the Appellants did not succeed on the rest of the claims. And that to that effect, the order on costs was appropriate and judicial discretion was judiciously exercised. He urged us to dismiss this appeal with costs. We have considered the judgment of the lower Court, the grounds of appeal and the submission of Counsel. We shall deal with the first and second grounds of appeal together. The issue that cuts across the two grounds is whether the Appellants' terminal benefits as well as their leave days and long service bonuses should have been calculated on the basis of salaries that were prevailing when the Appellants were declared redundant on 7 th March 2000, or when they were paid their terminal benefits in April 2002. It 1s not in dispute that the Appellants were declared redundant on 7 th March 2000. It is common cause that at the time, the Respondent did not have the funds to settle the Appellants' terminal benefits and consequently, continued paying them their salaries until 2002 when they were finally paid off. The Respondent informed each of the Appellants through their letters of redundancy that it will continue to pay them the monthly salary until their benefits were paid. The same letters stated that other terminal benefits and the basic salary will not change during this period. It is common cause that the Respondent revised salaries for its workers in 2001 and 2~02. Notwithstanding its stated position that the Appellants' basic salary and other benefits will not change after redundancy, the Respondent paid the Appellants the revised salaries until 2002. It would appear to us that it is this gesture of paying the Appellants revised salaries that has prompted the claim that even the package for terminal benefits should be as at April, 2002. It 1s trite law that redundancy is a form of termination of employment. On this premise, the Appellants' employment was therefore terminated on 7 th March 2000. After that date, they had to leave the workplace and not report for work. According to the letters that were written to them, the Appellants could now only wait to be paid their redundancy benefits. It is on record that to mitigate any financial hardship, the Respondent undertook to pay them their monthly salaries until such time that the benefits were paid. The Judge accepted that the Respondent's action was in compliance with Section 26 B (3) of THE EMPLOYMENT ACT1 • As the Judge rightly pointed out, this Section only applies to oral contracts. The agreed facts were silent on this point but the case proceeded on the basis that Section 26 B (3) of THE EMPLOYMENT ACT was applicable. Be that as it may, there was an undertaking in writing, by the Respondent, to pay the Appellants' salaries until the time that their benefits would be paid. The said letters also indicated the amount to which each Appellant was entitled and specifically stated that these dues will remain frozen as at the date of the letters. In this respect, we find the argument by the Appellants, to demand packages calculated on the basis of 2002 salaries, on account of having benefited from the salary revisions, to have no support in law. Having accepted that their contracts of employment were terminated by reason of redundancy on 7 th March 2000, there would be no basis to calculate their benefits based on salaries given at a later date. The LUKAMA3 case is therefore clearly distinguishable from the case at hand. In that case, the employees were serving a notice period, which meant that their employment contracts were going to expire at the end of the notice period. In our view, the Appellants should be indebted to the Respondent, because having stated in writing that neither the Appellants' benefits nor their salaries would change during the waiting period, the Respondent could have simply treated the excess pay as overpayment and recovered it from their benefits. We do not agree that the Respondent breached any conditions of service. If anything, the Respondent gave more than their undertaking. On the interpretation of the law, we agree with the submission of the learned Counsel for the Respondent that Section 26 B (3) of the EMPLOYMENT ACT 1 allows a situation where an employer, who declares an employee redundant, may pay the terminal benefits at a later date provided that they continue to pay the wages until the date of payment of the terminal benefits. We also agree that when an employer chooses this path, it does not postpone the date of redundancy to the date of payment of terminal benefits. The date of termination of the employment contract is still the date of redundancy. We therefore find no merit in the first and second ground of appeal. The third ground of appeal contends with the award of 25% costs to the Appellant. The Judge made the award on account that 'two issues' had succeeded; that of repatriation and interest. It is trite law that costs are awarded at the discretion of the Court. As we stated in the case of COLLET VS VAN ZYL BROTHERS LIMITED5 , such_ discretion must be exercised judiciously. As alluded to above, costs in this case were reduced on account of the fact that the Appellant succeeded only on two issues. The entire claim by the Appellants, as endorsed on the Writ of Summons and the Statement of Claim was as follows: "a. b. Terminal benefits worked out on 2002 February salaries and not on 1997 salaries. That they were entitled to a long service bonus based on the entire length of service without categorizing it on hourly and non-hourly rates as the classifications so imposed by the Defendant had the effect of depriving them of better terminal benefits to their detriment and without just cause and excuse. c. d. That they were entitled to accrued leave days from the date of termination on 7 th March 2000 to the date of payment of their terminal benefits at the end of February 2002 as they were for all intents and purposes employees the Employment Amendment Act No. 15 of 1997 and conditions of service under which they were employed. in accordance with Interest at short term deposit rates from the date of termination to date of judgment and thereafter at current bank lending rates to the date of settlement. e. Any other relief the Court may deem fit and appropriate and costs." Claims (a) to (c) failed. There was no specific claim for the repatriation allowance but it could probably be accommodated under (e). Only the claim under (d) succeeded. Against this backdrop, we cannot fault the reasoning of the trial Judge for awarding the Appellants 25% of the costs because their main claims failed. It is our view that the Judge properly exercised his discretion. We will therefore not disturb his Order on costs. The third ground of appeal also fails. From the foregoing, we find that there is no merit in this appeal. The Respondent is awarded costs of this appeal to be taxed in default of agreement. {Cf. L. P. Chibesakunda ACTING CHIEF JUSTICE :-:z::s;;,, .__ ,:;:;:-:=> LC. Mambilima DEPUTY CHIEF JUSTICE ----- 20